Introduction
The pandemic has driven a massive rotation of banking customers toward digital channels, accelerating a trend that was already underway prior to 2020, and much of the new behavior will be long-lasting. Banks have responded by aggressively cutting branches and increasing investments in their digital capabilities.
A reimagining of banks’ digital platforms and their relationship to the physical branch is underway. Banks are looking to push more transactions through digital channels while experimenting with ways to optimize branches for more complex transactions like loan applications or wealth management advice, for which customers – even younger, digital-native customers – still appear to desire in-person support.
Meanwhile, as mobile banking apps continue to add more basic banking capabilities, several banks are rethinking mobile apps at a more fundamental level. Customizing the in-app experience and delivering personalized financial insights to customers via the mobile channel are initiatives being considered across the industry, along with building out product marketplaces that allow customers to see all the products a bank offers within their mobile apps.
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However, this innovation will be slowed by the need for banks to work with legacy technology infrastructure that may not be designed for the task. Neobanks and fintech upstarts see their ability to build state-of-the-art technology infrastructure from scratch as a key competitive advantage in the struggle for customers, along with their lower operating costs. These companies have been able to raise large amounts of capital at lofty valuations to leverage these competitive advantages for growth. But lack of profitability remains a concern as many prominent neobanks appear dependent on external financing to keep their operations afloat.
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